1. Introduction

    For foreign registrants, comprehensive understanding of the value evaluation in China’s non-use cancellation system and official examination criteria as well as the latest judicial practices of the courts will help them deal with non-use cancellation cases forcefully, thus protect the registered trademarks more effectively.

2. Legislative Purpose of Non-Use Cancellation System and the Value Pursuit in Reviewing Non-Use Cancellation Cases in China

    2.1 The non-use cancellation system is enacted to remedy the defect of registration system, to urge the commercial use of trademarks by the registrants and to relieve the imbalance between the shortage of trademark resources and the strong demand for trademarks.

    Registration system is adopted in China, which means trademark rights come from trademark registration application other than prior use. The non-use cancellation system is enacted under the Trademark Law to urge commercial use of registered trademark by the registrant with the purpose of bringing the trademarks’ distinguishing function into full play, thus avoid the waste of trademark resources. The imbalance between the rapidly-increasing applications and the astonishing number of existent valid trademarks at present clearly shows the importance of trademark resource in China. In such circumstance, non-use cancellation system has undoubtedly become a sharp weapon to relieve the contradiction between the shortage and strong demand for trademark resources. Therefore, it is easy to understand why foreign registrants frequently encountered non-use cancellation in China.

2.2 Pursuit of balance among freedom, justice and order

    Freedom, justice and order are regarded as three basic values of the law. The establishment of non-use cancellation system and examination criteria in non-use cancellation cases have been trying to pursue balance among these three values. First of all, when it comes to “freedom”, the Trademark Law grants citizens the freedom to apply for and obtain the right of trademark registration. Secondly, as for the perspective of “order”, protecting trademark public resources, promoting the commercial use of registered trademarks to bring the distinguishing function into full play represent the Trademark Law’s pursuit of order through the provision of non-use cancellation system.

    One of the three principles to solve the possible conflicts among the three values is “rank of value principle”. Generally speaking, the hierarchy relationship from the top down is freedom, justice and order. However, in some certain situations, order can precede freedom. The non-use cancellation system under the Trademark Law which is enacted to make full use of the resources and safeguard the proactive development of market economy is a representation of order preceding freedom.

    Another principle to deal with the possible conflicts among the three values is “proportionality principle”, which means “when the infringement of one legal interest is unavoidable, the protection of the advantageous value of the law shall not exceed a certain degree”. Therefore, in non-use cancellation cases, Trademark Office, Trademark Review and Adjudication Board and Courts have adopted cautious reviewing standards, providing adequate relief measures for registrants after having taken the characteristics of the goods and services, the reality of the registrants’ business operation condition into full consideration. The aforesaid institutions closely abide by the interest-balancing principle to ensure the justice of each case and maintain the primary principle of the Trademark Law to “encourage trademark registration and protect registered trademarks”. The measures aforesaid give full expression to “proportionality principle”.

3. The initiating mode of non-use cancellation application in China means for foreign registrants it is more possible to confront with non-use cancellation in China than in other countries.

    Firstly, no special limitations on the applicants have been stipulated on the initiation of non-use cancellation in China. Any entities or individuals may request non-use cancellation of a trademark after the mark has been registered for more than three years without providing evidence for losses caused or would be caused by the registered trademark.

    Secondly, the applicant for non-use cancellation may not provide any evidence to prove that the trademark has not been used within prescribed time as the Trademark Office only request the applicant for non-use cancellation to “explain the relevant conditions”. All that the applicant for non-use cancellation need to do in practice is to type the name of the trademark in Baidu search engine to make sure there is no any searching result pointing directly at the use of the trademark by the registrant. The burden of proof lay on the trademark registrant. In conclusion, for owner of a registered trademark, the possibility of encountering non-use cancellation in China has increased significantly.

4. To have a better understanding of development of Chinese official examination standards through cases and to safeguard the registrants’ right more effectively in non-use cancellation cases.

    4.1 In non-use cancellation cases, whether the produce behavior of OEM can maintain trademark registration

    — The Administrative Retrial Case of Review on Trademark Non-Use Cancellation between Hornby Hobbies Limited and TRAB (Case No.: (2010) Final decision on administrative cases of High People’s Court No. 265)

     A non-use cancellation was filed against the trademark registration No. 731233 “SCALEXTRIC” in respect of “toy” of Hornby Hobbies Limited. Both the Trademark Office and the Trademark Review and Adjudication Board made the decision to cancel the registered trademark. Beijing No.1 Intermediate People’s Court upheld the judgment of the Trademark Review and Adjudication Board. Dissatisfied with the judgment, Hornby Hobbies Limited appealed to Beijing High People’s Court for second-instance. The High Court made a final decision in (2010), i.e. final decision on administrative cases of High People’s Court No. 265: revoking the judgment and decision made by Beijing No.1 Intermediate People’s Court and TRAB. The Beijing High People’s Court held that, although the products made from materials supplied by foreign clients have not been put into circulation in Chinese mainland market, yet if the exclusive right of relevant trademarks are cancelled because the behavior of processing materials supplied by foreign clients is not considered as trademark use, it may be unfair and irreconcilable with the policy of expanding foreign trade.

    The court clearly stipulated the behavior of processing materials supplied by foreign clients which have not been put into circulation in Chinese mainland market as the behavior of trademarks use. The judgment, although has not taken the trademarks’ basic function of distinguishing the sources of products into full consideration, is still made after a comprehensive consideration of the macroeconomic situation in China. Presently, export remains the main driving force for Chinese economic development. Therefore, it will bring negative influence to the enormous existence of OEM produce behaviors in China if all OEM is not regarded use of trademark in non-use cancellation cases.

    4.2 Whether new evidence submitted in administrative litigation stage will be taken into consideration by the court; What is the requirement for the format of evidence proving licensing relationship; Whether E-mail can be taken as use evidence, What can be use proofs for “sales promotion (for others)” in Class 35.

    — The Administrative Retrial Case of Review on Trademark Non-Use Cancellation between Watson Enterprises Limited and TRAB (2012) Finaldecision on administrative cases of High People’s Court No. 355

     On 4th January, 2011, TRAB made a decision to maintain trademark registration No. 1249845 trademark “格调 TASTE” (hereinafter referred to as review trademark) on the services sales promotion (for others) in Class 35. Beijing No.1 Intermediate People’s Court upheld the TRAB’s decision. The judgment of first-instance is still maintained in second-instance made by Beijing High People’s Court. Several highlights of the second instance judgment are concluded as following:

4.2.1 Whether new evidence submitted by a trademark registrant at the litigation stage shall be taken into consideration by the court.

    The answers of the two trial courts are positive, because non-use cancellation cases are related to important issue of whether the trademark will be maintained. Since the purpose of establishing non-use cancellation system is to promote the commercial use of trademarks, new evidence which are submitted in litigation procedure other than administrative procedure shall be taken into consideration from the perspective of maintaining the stability of trademark registration and balancing the interests of both parties.

4.2.2 What are the requirements for the format of authorization, license contract and other similar documents.

    In this case, the authorization letter did not indicate the date of authority, identification information of the parties. While, the court of second instance held that the authorization letter itself can prove the authorization is the registrant’s true intention. Therefore, even the signature date is after the time period, in which the registrant is required to submit use proofs, it can still be regarded as a subsequent admission for the act of authorization. It is thus clear that the court’s only requirement for the documents of certifying the existence of licensing relationship is that the document shall represent the real intention of both parties.

4.2.3 Notarized E-mails are identified as effective use evidence.

    The court held that “The third party electronic platform has high credibility since the content and time of sending and receiving emails usually cannot be revised by its subscribers. Under the circumstance that Appellant has not submitted evidence for the possibility of the aforesaid information being revised, evidence 6 (email in taste@vip.sina.com) can be taken into consideration together with other evidence for this case. Combining the relationship reflected by the pictures and the sending and receiving time of the emails, it can be concluded that the pictures belong to 格调(GE DIAO, namely Chinese characters in the mark)leather shop located in Shenhe District, Shenyang City in the year of 2005 and 2006.” This proves that the time for sending and receiving of notarized emails can be admitted by the courts since the emails exist in a third party electronic platform. The identification of time is of great significance in non-use cancellation cases.

    Enumeration is the primary method adopted by the Trademark Law of the People’s Republic of China to illustrate the sort of “use evidence”. Since enumerative lawmaking has its defects, the trademark registrants shall collect use proofs based on characteristics of her own business and make efforts to obtain various kinds of evidence.

4.2.4 In this case, use of trademarks on shop plaques and propaganda posters are identified as use on “sales promotion (for others) in Class 35.

    Both the two trial courts held that taking the association reflected by pictures and the sending and receiving time of emails into consideration, it can be concluded that the authorized party’s leather shop located in Shenhe District, Shenyang City had used “格调 TASTE”, namely the mark, in its shop plaques and propaganda posters in the year of 2005 and 2006. For supplier of services of sales promotion (for others), it is common and reasonable that they use service trademark on shop plaques and propaganda posters in their service places.

    Because of difficulty in certifying use of service trademark, the court had adopted relatively loose standards in admitting the validity of the evidence. Although the use of trademarks on shop plaques and propaganda posters is not occurred during the process of providing services and its probative force is inferior to that service fee invoices and etc., the court still held that the use of trademark on shop plaques and propaganda posters is use on sales promotion (for others).

5. Conclusion

    Under the framework of Trademark Law of People’s Republic of China with the protection of registered trademarks as the primary principle, if foreign enterprises and natural persons intend to carry on sales business or OEM manufacturing in China, they shall consider to apply for trademark registration in China. In addition, special attention shall be paid on preserving various kinds of use evidence in their daily business. Once encountered non-use cancellation filed by others, the registrant shall consult the experienced local trademark agencies immediately and take proactive role in assisting local agent to collect all kinds of possible use evidence.